Trends in hours and economic growth

We study the substitutions between home and market production over long periods of time. We use the results to get predictions about long-run trends in aggregate market hours of work and about employment shifts across economic sectors, driven by uneven TFP growth in market and home production. The model can rationalize the observed falling or U-shaped pattern for aggregate market hours, the complete marketization of home production in agriculture and manufacturing, and the shift from agriculture and manufacturing to services. We find support for the model's predictions in long-run US data.     

Home Production and China's Hidden Consumption

This paper presents a structural approach to estimating the value of home production in China. The structural model incorporates stylized facts about the time allocation of Chinese households, such as the active participation of retired individuals in home production. Estimates based on the China Health and Nutrition Survey show that the aggregate value of home production as a fraction of adjusted GDP have fallen at a rate of 2.7 percent per year over the past decade in China. However, a significant part of China's private consumption was still satisfied through unpaid home production in 2009, amounting to roughly 18 percent of adjusted GDP.     

HOUSEHOLD PRODUCTION AND NATIONAL PRODUCTION: AN IMPROVEMENT OF THE RECORD

1 By no means is the home based production of housewives the only or even the most important aspect of nonmarket production. The entire question of work vs. leisure, and the distinction between leisure and nonmarket oriented production, are currently under intensive scrutiny. See for instance the work of Nordhaus and Tobin [7, especially appendix section A.3], Gronau [2] and items cited in Gronau. The omission from the national income accounts of work performed at home by males, non-married females, and “working wives” is extremely important. This paper is concerned only with married females because (1) they are the subject of what must be one of the oldest jokes in the subject of social accounting, and (2) the relationship of production by housewives to total production has changed in the past ten years or so, and that deserves some attention even if it is not the most important thing which has been happening with respect to the GNP.
Specifically, we will present estimates of the value of home based nonmarket production by housewives. These estimates will then be used to supplement various national product aggregates in order to calculate more accurate growth rates for the U.S. economy. We find that the value of nonmarket production by married women during the 1960's has averaged approximately thirty percent of the GNP and close to 40 percent of the national income. The inclusion of the nonmarket work of housewives in GNP would reduce the measured rate of growth of real GNP per potential worker by about ten percent, the exact amount depending on how the value of nonmarket work is estimated. Our estimates indicate a reduction in the absolute rate of growth of almost 0.25 percent.     

Marriage and employment participation with wage bargaining in search equilibrium

We build an equilibrium search model where married couples make joint decisions on home production and labour market participation and analyse the implications of our results for a frictional marriage market. A worker's bargaining position reflects their productivity, and the productivity and employment status of their spouse. People sometimes accept transitory jobs only to raise the spouse's long-term wages. Firms sometimes reduce turnover by unilaterally increasing a worker's wage, ensuring that the spouse stays at home.     

Executive Compensation and Legal Investor Protection: Evidence from China's Listed Firms

This paper seeks to relate the increases in executive compensation observed in China to improvement of the legal environment. We build a simple model and demonstrate that improvement in legal investor protection reduces the manager's private benefits of control; in order to make the managerial incentives compatible, some of the forgone private benefits have to be compensated in the form of increased executive pay. Using a large dataset on Chinese listed corporations, we find strong evidence that improvement of the legal environment is significantly associated with both the rise in executive compensation and the reduction in agency costs, which is consistent with our model predictions.     

CONSUMPTION AND TIME USE OVER THE LIFE CYCLE

We incorporate home production in a dynamic general equilibrium model of consumption and savings with illiquid housing and a collateralized borrowing constraint. The calibrated model explains life‐cycle patterns of households' time use and consumption of different categories documented from the microdata. It predicts that the interaction of the labor efficiency profile and the home production technology explains households' time use. The resulting income profiles, the endogenous borrowing constraint, and home production account for the initial hump in consumption. The complementarity of home hours, home input, and housing in home production drives the consumption profiles later in the life cycle.     

Firm Heterogeneity,Contract Enforcement,and the Industry Dynamics of Offshoring*

We develop an endogenous growth model with R&D spillovers to study the long‐run consequences of offshoring with firm heterogeneity and incomplete contracts. In so doing, we model offshoring as the geographical fragmentation of a firm's production chain between a home upstream division and a foreign downstream division. While there is always a positive correlation between upstream bargaining weight and offshoring activities, there is an inverted U‐shaped relationship between these and growth. Whether offshoring with incomplete contracts also increases consumption depends on firm heterogeneity. As for welfare, whereas with complete contracts an R&D subsidy is enough to solve the inefficiency due to R&D spillovers, with incomplete contracts a production subsidy is also needed.     

Transboundary Pollution and International Migration

We analyze the welfare effects of international migration in the presence of transboundary pollution. We use a simplified Copeland and Taylor (1999) model, where the (developed) home country's pollution abatement technology is superior to that of the (less developed) foreign country. If there is no trade, workers will migrate from the foreign country to the home country. The foreign country gains from migration, but whether the home country gains or not depends on the abatement‐technology gap and the magnitude of the coefficient of transboundary pollution. World welfare will increase under migration. If there is free trade in goods, international migration occurs when the home country specializes in the production of the environmentally sensitive good. In this case, migration will result in increased production of the manufactured good and increase the level of world pollution.     

Some reflections on technical progress in financing small firms ∗

Starting from a comparison of Josef Steindl's observations on the problems of the financing of small firms, with the implications of the Modigiani – Miller approach to financial structure, this paper investigates relationships between financial leverage and operating leverage by the application of option pricing theory to the value of a firm's debt. Drawing on possible differences between the second-hand break-up value and the present value of the flow of earnings from a firm's assets, it suggests linkages between production structure and firm financial structure. It then extends these results to resolving the problems of providing market financing for the creation and evolution of small firms in industrialized and transforming economies.     

Surplus Value Production and Realization in Marxian Theory – Applications to the U.S., 1990–2015

ABSTRACT

Marx's Capital shows that surplus value can be produced in one industry, yet realized as profit (and possibly revenue) by other industries over the course of circulation. This paper highlights the separation between surplus value production and realization in Marx's work, and develops a new method for estimating surplus value production at the industry level to trace out transfers of surplus value across industries. The framework is based on the ‘New Interpretation’ and links money value added to surplus value production at the industry level. Data on value added by industry for the U.S. are used to estimate surplus value production by industry. The analysis allows comparison of surplus value production and realization in each industry. The pattern of differentials between surplus value creation and realization across industries sheds light on the processes of capitalist competition and points to a source of instability for capitalist economies.     

Outsourcing: Volume and Composition of R&D

This paper examines the impact of the outsourcing of production on the volume and composition of the home country's research and development (R&D). We find that outsourcing decreases the process R&D of the multinational firm in large markets when it only conducts process R&D (the substitution effect between outsourcing and process R&D). Outsourcing tends to emerge as a complementary factor to product development when the multinational firm conducts both product R&D and process R&D (the complementary effect between outsourcing and product R&D) under some conditions. This implies that international outsourcing has a different effect on product innovation and process innovation.     

Market access for sale

This paper focuses on the links between foreign lobbying and preferential market access granted by the United States' government to exporters in the rest of the Americas. We first develop a simple framework based on Grossman and Helpman [Grossman, G., Helpman, E., 1994. Protection for sale. American Economic Review 84 (4) 833–850.] to explain how lobbying by foreign firms affects their preferential access to the United States market. We then estimate the model using data on tariff preferences and lobby contributions for the 34 countries in the region. Empirical results suggest that foreign lobbying is an important force behind preferential market access to the United States. The structural estimates indicate that the weight given to foreign lobby contributions in the United States' government objective function is five times higher than the weight granted to tariff revenue forgone due to preferences. Thus, our results indicate that market access is up for sale and foreign lobbies are buying it.     

Pasinetti,Keynes and the multiplier

This paper explores the relationship between the Keynesian multiplier and Pasinetti's model of pure production. Key assumptions of Pasinetti's model are its multisectoral structure, the definition of all income as a reward to labouring activities and, as a consequence, the operation of a pure labour theory of value. A translation between these models is effected by introducing investment as an exogenous determinant. By drawing from Keynes to apply his concept of the wage unit, it is possible to aggregate from Pasinetti's multisectoral model to a genuinely macroeconomic multiplier. This provides a way of using the scalar Keynesian multiplier without making the restrictive one-commodity assumption. In addition, this formal demonstration enhances our understanding of the relationship between the wage unit and the labour theory of value. Finally, critics have argued that Pasinetti downgrades the importance of institutional analysis; in contrast, the derivation of a scalar Keynesian multiplier contributes to an understanding of how relevant Pasinetti's approach is to the analysis of a monetary production economy.     

THE NUMBER OF FIRMS AND THE POLITICS OF STRATEGIC TRADE POLICY

Incorporating home firms' lobbying in a country into a third market model of oligopoly, this paper studies how such lobbying affects the government's strategic export policy scheme. We pay special attention to the home firms' lobby formation and its effect on domestic welfare. The home firms can organize a lobby more easily when the number of their rival foreign firms is larger than that of them, and/or when the government is overly concerned with political contribution relative to domestic welfare. The strategic export policy under lobbying cannot improve the domestic welfare, which depends on the number of firms, the government's concern about political donation and the level of socially wasted lobbying costs.     

Sustainability and the value of the ‘regulating’ services: Wetlands and water quality in Lake Victoria

The regulating services provided by ecosystems are amongst the most important for the sustainability of resource use, and yet they are also amongst the least understood. This paper considers one set of regulating mechanisms - the buffering functions of wetlands - and considers the information needed to identify both the value of the services offered by wetlands, and their substitutes. Using data from a catchment discharging water and nutrients to the Kenyan segment of Lake Victoria, the Yala catchment, the paper models the interactions between agriculture and fisheries as mediated by wetlands at the lake margin. More particularly, it estimates the value of the forgone nutrient retention function involved in the conversion of the wetland to agriculture, and the scope for providing the same services through land use change elsewhere in the catchment. The total cost of the payments that would compensate farmers for on-farm nutrient buffering services is 3.86 M US$ year^− 1, or 35% of the total gains from wetland conversion to crop production. This finding contributes to an understanding of both the value of regulating services and how they might most effectively be delivered in alternative ways.     

Marx on Ricardo: an explanation of some important misunderstandings

Ricardo's theory of value and distribution is reconstructed by proceeding along the lines of Marx's critique of Ricardo. It is thus an anti-critique of Marx's reading of Ricardo. The chapter ‘On Value’ in Ricardo's Principles is shown to be a consistent and rigorous treatment of the determinants of prices of production. According to Ricardo labor-values merely serve to approximate more elaborate standards of value. Marx's criticism is shown to rest crucially on his own misinterpretation of Ricardo's definitions and presupposes his own – faulty – theory of surplus value. Therefore Ricardo's theory can – contrary to Marx's theory of surplus value – still be regarded as a fruitful complement to Sraffa's model.     

Home Bias,Border Effect and Internal Market Integration in China: Evidence from Inter‐provincial Value‐added Tax Statistics

This paper examines the home bias in regional trade and the integration of the internal market in China using inter‐provincial value‐added tax statistics. The administrative border between regions is an important trade barrier that results in home bias. Using a border effect model, we find evidence of home bias in provincial trade and relatively low border effects in domestic‐products trade in China. Moreover, the multilateral resistance model, based on a microeconomic foundation, also has strong power in explaining border effects in provincial trade. The empirical results imply that in accordance with some developed economies, China's market integration appears to have reached a high level.     

Changes in women's hours of market work: The role of returns to experience

Over the past several decades, married women's hours of market work increased significantly in the US. I argue that changes in behavior by married women with children account for much of this change. In particular, the pattern of married women's work hours has changed substantially over the life cycle. In the past, married women in childbearing age tended to specialize in childrearing and home production activities at the expense of engaging in market work. Now they do not curb the hours they work in the market.What factors contribute to this change in behavior? In this paper, I focus on relative changes in returns to experience as an explanation. I use PSID data for the 1970s and the 1990s to estimate the extent to which relative returns to experience have changed. I then use a life-cycle model with human capital accumulation and home production to quantitatively assess the consequences of this increase for married women's hours of work over the life cycle.The estimates of the human capital production function show that women's marginal returns to experience increased by 25% across decades, whereas men's increased by only 6%. I show that this relative change accounts for 96% of the observed variation in married women's hours of work. Moreover, according to the model, the increase in returns to experience accounts for roughly half of the increase in the female/male wage ratio that is found in the data. I also show that a decline in the gender wage gap, holding returns to experience constant, accounts for only 18% of the total increase in hours of work. As a consequence, it cannot explain the change in the shape of women's life-cycle profiles. Although the focus of the analysis is the labor supply behavior of women, the model also allows predictions about the behavior of men and single women. These predictions are consistent with the data.     

Parental investment in children's human capital in urban China

The present study tests the extent of parental forgone consumption used instead to invest in children's human capital by use of intrahousehold resource allocation models. Using an unusual, comprehensive data set for urban China, there is more spending on boys aged 13 to 15 but more on girls aged 16 to 18, suggesting that standard human capital theories and traditional perceptions of gender bias do not completely explain educational expenditure decisions. The evidence from urban China is consistent, though, with human capital models which consider parental intertemporal preferences. Also, the findings suggest that the perceived bias in favour of sons exists weakly in contemporary urban China.     

The Counterfactual Method of Marx's Theory of Surplus

The aim of this paper is to show that Marx supports his theory of surplus value by developing a counterfactual argument, that is, by comparing the 'normal' state of a capitalist economy against a hypothetical state in which no surplus is produced. Marx then divides his analysis of value into three successive steps. The first deals with the production of new value in the sphere of production; the second with the process of creation of surplus value, both in the sphere of production and in the sphere of circulation; and the third with the process of equalisation of the rate of profit, which is accomplished via capitalist competition in the sphere of circulation. The paper proposes a formalisation of the three-step analysis and of the counterfactual argument. Marx's three-step analysis is shown to be a scientific analysis of the hidden connections between social relations (expressed in labour flows) and commodity exchange; thus it is not a useless detour.